Vacant lot. What would you do?

Question

My husband and I are rookies but very interested in buy and hold real estate. Recently, I've been sharing our (my) goals with my father-in-law. He has offered to sell us a vacant lot at a huge discount to help us get started (he paid $10K and is willing to sell it to us for $25K - will be worth $100K+ once water/sewer is run to it). The lot is adjacent to a brand new single family home neighborhood with homes in the 300K-400K range.

My question is - what would you do with the property?

1. Just run water/sewer to it and sell it. (Essentially flip the lot to get cash for our next property)

2. Build a single family home and sell it. (FIL is a licensed home builder - so it's possible we can get discounts again - immediate equity)

3. Build a Duplex/Triplex and rent the units. (We just built our home, so house hacking is not an option for us)

4. Pave a large portion of the lot and rent out parking for RVs, Campers, Boats for the nearby neighborhoods (HOA doesn't allow large vehicles in driveways/street parking)

5. Other???

Again - we're brand new to investing in real estate and my FIL is anxious to help us get started (he is set financially and selling the property to us so cheap is a gift). We are guessing that it will be somewhere around 10-15K to get water/sewer run there. I haven't done much research other than that - came here first for an idea of where we should start.

Account Closed · Answer

Hey I welcome competition!

there are only a few lots left for sale, I bought them all 😂 had to buy 45 acres to start making my own lots!!

Account Closed · Answer

As a spec home builder, I can say that it's a rush building new homes. That said it's also very complicated if you don't have complete control.

might need to see what the city planning has to say about what you can build and getting authorization for whatever you have planned be it a lot to sell or a house.

its my experience that lots sit for a very long time. At least here where I am...I seem to be the only person buying up lots to build on.

I wish we were up and running with exposure in you're state. Our platform is perfect for your type of situation.

If you have questions with regard to building or civil engineering, I'm happy to help.

David M. · Answer

@Meghan Custer

Aside from the aforementioned market conditions and best use scenario, what is your financial position (that is somewhat rhetorical given this is an open, public forum)?

Do you have the financial capability to construct a home?  Also, this is a good opportunity to learn about home construction, zoning, applying for construction permit, etc.  But, this is also a good opportunity to lose money due to hold ups, loss of time (i.e. holding costs / money).  Also, is this the sort of real estate investment you want to do?  If you don't want to be builder, maybe just hook up the utilities and take your profit.  If you can afford to learn on this property, go ahead..

Be happy to chat.  Good luck.

Leilah Davis · Answer

Account Closed LOL! that's awesome man, congrats!

Leilah Davis · Answer

I ditto everything Account Closed said ... except the part about lots sitting for a long time. We build spec homes as well and lots in my area are selling like HOT CAKES! We just lost out on a lot today that went for $85k (we were planning to offer $95k but the seller didn't even bother to give me a courtesy call before going under contract.) Bill, where are you based? If you want some competition company in your area, we'll happily come and help you buy up those lots!! JK JK ... Anyway, I think it all depends on the area, and what option is going to make the most sense financially also depends on the area. I agree that with FIL being a builder, if he's willing to work with you and get you discounts seems like SFR would be the best route! Especially since that's his area of expertise and he can help guide you a little. best of luck!!

Account Closed · Answer

Why doesn't he get utilities and sell it for 100k?

Meghan Custer · Answer

Thanks everyone!!! I really appreciate the feedback. I'm contacting the city today to get some more information on zoning in that area and to see if it's possible to subdivide. I also plan on contacting a few property managers in the area to see what renters are looking for in that part of town. That will likely determine if we are going to build a SFH and sell it or try for a duplex and keep it as a rental.

David A Lisowski · Answer

How big is the lot? Can you subdivide it?

Seems construction costs and build times are up right now so development might not be the best return.

However, if you can create enough cash-flow on a developed property, then go for it.

If you could subdivide, it might worth building and selling one unit to finance the other(s).

Otherwise, a plain, empty lot that can't be subdivided might only be worth building a primary residence you could later sell or keep as a rental.

Joel Miller · Answer

@Meghan Custer

If the city would let you I’d subdivide the lot and sell the empty lot and build a home on the other lot with your FIL’s help. Sounds like an awesome situation!

Vacant lot. What would you do?

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